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3232UPDATE: During Oral Argument, DC Circuit Suggests Waiver Period for State Water Quality Certification May Be Less Than One Yearhttps://www.pipelinelaw.com/2019/01/31/update-during-oral-argument-dc-circuit-suggests-waiver-period-for-state-water-quality-certification-may-be-less-than-one-year/
Thu, 31 Jan 2019 19:10:57 +0000https://www.pipelinelaw.com/?p=2674On Friday, a court ruling provided some clarity regarding the Clean Water Act (CWA) § 401 water quality certification process. As forecasted in our November 1, 2018 blog post (below), the US Court of Appeals for the DC Circuit has ruled that a state waives its CWA § 401 authority when, pursuant to a written agreement, an...

Continue Reading]]>On Friday, a court ruling provided some clarity regarding the Clean Water Act (CWA) § 401 water quality certification process. As forecasted in our November 1, 2018 blog post (below), the US Court of Appeals for the DC Circuit has ruled that a state waives its CWA § 401 authority when, pursuant to a written agreement, an applicant repeatedly withdraws and resubmits its request for water quality certification in order to restart the one-year waiver clock. Hoopa Valley Tribe v. FERC, No. 14-1271 (D.C. Cir. Jan. 25, 2019). According to the Court’s opinion, this sort of arrangement serves to circumvent the Federal Energy Regulatory Commission’s (FERC) “congressionally granted authority over the licensing, conditioning, and developing of [the] project,” and “if allowed, the withdrawal-and-resubmission scheme could be used to indefinitely delay federal licensing proceedings and undermine FERC’s jurisdiction to regulate such matters.”

The Court’s strict adherence to the one-year deadline has significant implications for both the hydroelectric and interstate natural gas pipeline industries. For example, over 15 other hydroelectric projects have been delayed by pending water quality certifications, with an average delay over seven years. This decision could provide the impetus to resolve such delays. Furthermore, the Court addresses one of the key issues that arises in disputes over the development of interstate natural gas pipelines. Ambiguity over when the statutory one-year deadline begins and ends, and whether withdrawal and resubmission of a request restarts the clock, has caused substantial delays. [1] Such delays have produced significant capacity constraints across the northeast, causing natural gas prices to skyrocket during cold spells.[2] For example, on January 18, 2019, a large utility announced a moratorium on new natural gas connections in parts of Westchester County, NY.[3] The Hoopa Valley decision, however, makes clear for the first time that a scheme to withdraw and resubmit the same request over an extended period of time constitutes waiver. Moreover, the court clarifies that “while a full year is the absolute maximum, it does not preclude a finding of waiver prior to the passage of a full year.”

Such statements suggest a potential reversal in the ongoing controversy over the New York Department of Environmental Conservation’s (NYDEC) April 2016 denial of water quality certification for the Constitution Pipeline. After unsuccessful challenges in various venues, Constitution petitioned the DC Circuit for review of FERC’s finding that NYDEC did not waive its CWA § 401 authority. In November 2018, in response to FERC’s motion, the DC Circuit agreed to hold the Constitution case in abeyance until it reached a decision in Hoopa Valley “because it raises common questions of law.” While the facts between the two cases are somewhat different—in Hoopa Valley the certification was delayed by more than a decade subject to a written agreement to withdraw and resubmit the same request year after year, whereas Constitution agreed to withdraw and resubmit its request twice, between August 2013 and April 2016, to provide NYDEC with additional time to reach a final determination—by granting FERC’s request to hold the case in abeyance, the DC Circuit, at a minimum, recognized the legal similarity between the two cases. If the Court determines that the same legal rationale should apply to Constitution’s facts, then we are likely to see a similar outcome and a finding that NYDEC waived its authority.

[2]See Benjamin Storrow, Cold snap reignites debate over future of New England grid, E&E News (Jan. 11, 2018) (In January 2018, during a cold snap, “New England’s spot [natural gas] prices registered as the most expensive in the world [prompting] power plant owners to idle their natural-gas fired workhorses… in favor of their seldom-used oil units.”). These high prices were primarily caused by insufficient natural gas pipeline and storage capacity. In response to natural gas constraints in New England, states were forced to purchase imported liquefied natural gas (LNG) from Russia. See Anna Mikulska, Delivery Of Russian LNG Heats Up Discussion About U.S. Energy Dominance And Sanctions, Forbes.com (Feb. 6, 2018).

]]>During Oral Argument, D.C. Circuit Suggests Waiver Period for State Water Quality Certification May Be Less Than One Yearhttps://www.pipelinelaw.com/2018/11/01/oral-argument-d-c-circuit-suggests-waiver-period-state-water-quality-certification-may-less-one-year/
Thu, 01 Nov 2018 20:18:36 +0000https://www.pipelinelaw.com/?p=2625In recent litigation involving the development of interstate natural gas pipelines, one of the key issues has been whether the state has waived its authority under Clean Water Act section 401 by exceeding the one-year time period. In a separate case involving a series of hydroelectric facilities, the waiver period was again directly at issue. On October 1, at oral argument before the D.C. Circuit, the parties addressed whether California and Oregon had waived their water quality certification authority by having the applicant withdraw and resubmit its request for certification over a number of years. Notably, the judges seemed to agree that FERC could make a waiver determination before the end of the one-year time limit and that withdrawing and resubmitting an application may not always restart the clock.

In recent litigation involving the development of interstate natural gas pipelines, one of the key issues has been whether the state has waived its authority under Clean Water Act (CWA) section 401 by exceeding the one-year time period.[1] In a separate case involving a series of hydroelectric facilities, the waiver period was again directly at issue. On October 1, at oral argument before the U.S. Court of Appeals for the D.C. Circuit, the parties addressed whether California and Oregon had waived their water quality certification authority by having the applicant withdraw and resubmit its request for certification over a number of years. Notably, the judges seemed to agree that the Federal Energy Regulatory Commission (FERC) could make a waiver determination before the end of the one-year time limit and that withdrawing and resubmitting an application may not always restart the clock.

The case, Hoopa Valley Tribe v. FERC, No. 14-1271 (D.C. Cir. 2018), involves a dispute over the operation of the Klamath Hydroelectric Project (KHP), a series of dams and reservoirs on both sides of the California-Oregon border. The project obtained its original 50-year operating license in the 1950s. Set to expire in 2006, PacifiCorp (KHP’s operator) submitted its relicense application to FERC in 2004. In 2007, FERC completed its environmental review and concluded that a new license would likely need to incorporate costly fish passage requirements for the protection of local salmon species. In 2010, PacifiCorp negotiated and signed an agreement with 48 interested parties (e.g., the Governors of Oregon and California, local tribes and counties, farmers, conservation groups, etc.) to decommission and remove the dams by 2020. As part of the agreement, PacifiCorp agreed to withdraw and resubmit its CWA section 401 requests every year to avoid waiver.

In 2012, the Hoopa Valley Tribe petitioned FERC for a declaratory order that California and Oregon had waived their 401 authority, and argued that FERC had violated its statutory duties for failing to act on the KHP relicense application. FERC found that, while the circumstances are “far from ideal,” PacifiCorp’s withdrawals and re-submission of its requests for certification (from 2008-2014) restarted the one-year deadline each year.[2] Hoopa Valley appealed FERC’s determination to the D.C. Circuit.

Under the CWA, a state waives its authority if the agency “fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request.” 33 U.S.C. § 1341(a)(1) (emphasis added). During oral argument, the attorney for the Hoopa Valley Tribe argued that FERC had misinterpreted the CWA by finding that it must wait a full year before determining whether a state has waived its authority. One of the issues raised by the judges was whether FERC regulations had already defined a “reasonable period of time” as one year. FERC regulations state “[a] certifying agency is deemed to have waived … if the certifying agency has not denied or granted certification by one year after the date the certifying agency received a written request for certification.” 18 C.F.R. § 4.34(b)(5)(iii). The attorney responded by stating that he does not read this regulation to preclude FERC from making a determination that the state has not acted within a reasonable period of time and that waiver has occurred before the one year is up.

FERC’s attorney argued that the Commission interprets the CWA and its own regulations to provide states with the maximum of one year because it provides early certainty to all parties as to what will be considered reasonable. In a quick back and forth with Judge Pillard, the attorney cited the Second Circuit’s Millennium Pipeline decision to support the notion that California and Oregon acted appropriately in requesting that PacifiCorp withdraw and resubmit its request for certification. In that case, in response to New York’s concern that a strict one-year period would require premature decisions by state agencies, the Second Circuit explained that the state agency could deny the application without prejudice or “request that the applicant withdraw and resubmit the application.” Judge Pillard correctly noted that this language is dictum and that the issue of whether a state and applicant can agree to annually withdraw and resubmit its request for certification to avoid waiver was not squarely before the Second Circuit. Judge Pillard also expressed skepticism that the statute allows an applicant to restart the one-year clock by withdrawing and resubmitting a request. The statute, Judge Pillard noted, provides that waiver occurs if the state does not act within an appropriate period of time after receipt of such request, and the original request “has not changed.”

Significantly, Judge Sentelle made the point that the language of section 401 implies that the licensing agency has the authority to deem a time period unreasonable or “find its effect” unreasonable and find waiver before the one-year clock runs out. In response, the FERC attorney pointed to an EPA regulation providing that the licensing or permitting agency determines what is reasonable, see 40 C.F.R. § 121.16(b), and that if FERC started to make determinations case by case it would create uncertainty. Judge Sentelle responded by stating that agencies apply the term “reasonable” all the time to the facts of a particular case, and FERC should have no difficulty doing so here.

The judges’ criticism of FERC’s strict adherence to the one-year deadline, and their implication that the statute allows FERC to make a waiver determination before the end of the one-year period, suggests that we are likely to see the judges take a similar position in the forthcoming opinion. According to recent statistics,[3] the D.C. Circuit, on average, issues an opinion approximately three months after oral argument. Thus, the Court is likely to issue its opinion at the end of the calendar year.

]]>Second Circuit Affirms Waiver Period for State Water Quality Certification Begins Upon Receipt of Request for Certificationhttps://www.pipelinelaw.com/2018/03/16/second-circuit-affirms-waiver-period-for-state-water-quality-certification-begins-upon-receipt-of-request-for-certification/
Fri, 16 Mar 2018 19:12:56 +0000https://www.pipelinelaw.com/?p=2530On March 12, 2018, the United States Court of Appeals for the Second Circuit affirmed a Federal Energy Regulatory Commission (FERC) order finding that delays by the New York Department of Environmental Conservation (NYDEC) in reviewing Millennium Pipeline Company’s application for water quality certification constituted waiver of NYDEC’s authority under the Clean Water Act (CWA)....

Continue Reading]]>On March 12, 2018, the United States Court of Appeals for the Second Circuit affirmed a Federal Energy Regulatory Commission (FERC) order finding that delays by the New York Department of Environmental Conservation (NYDEC) in reviewing Millennium Pipeline Company’s application for water quality certification constituted waiver of NYDEC’s authority under the Clean Water Act (CWA). As we detailed in an earlier blog post, FERC found that NYDEC’s delay exceeded the one-year statutory period established by CWA Section 401. The Millennium case is just one of several interstate natural gas pipeline projects that have faced delays associated with the CWA Section 401 permitting process. (See, e.g., Atlantic Bridge Project, Atlantic Sunrise Project, Constitution Pipeline, Northern Access Project, PennEast Pipeline, and Spire STL Pipeline.) The Court’s decision resolves the nearly three-year permitting process for the Millennium Valley Lateral Pipeline and clarifies for other projects (and state agencies reviewing those projects) that the one-year waiver period begins when the state agency receives the initial request for certification.

Pursuant to the Natural Gas Act (NGA), FERC has regulatory jurisdiction over interstate natural gas pipelines, and when construction of a pipeline involves discharges into waters of the US the project is also subject to the requirements of CWA Section 401 and must obtain water quality certification from the appropriate state agency that construction will not violate state water quality standards. 33 U.S.C. § 1341(a)(1). Under the CWA, the state agency waives its certification authority if the agency fails to act on a request within a reasonable period of time, not to exceed one year. Id. Despite the plain language of the statute, states have in the past crafted state-specific standards for what constitutes a “request” for certification sufficient to start the one-year statutory period.

Millennium’s lengthy permitting process, described in detail here , culminated in a FERC order on September 15, 2017, which concluded NYDEC’s 21-month delay constituted waiver of the agency’s authority under CWA Section 401. NYDEC sought review of FERC’s order at the Second Circuit. NYDEC and its allies made the following three arguments:

NYDEC should receive Chevron deference for its interpretation as to what constitutes a valid “request” triggering the one-year, statutory waiver period.

The review process under Section 401 begins only after the agency deems an application “complete.”

FERC does not have jurisdiction over the 8-mile long lateral pipeline because it is located entirely within New York.

In response to whether NYDEC should receive deference, the Court found that “[a] state agency’s interpretation of a federal statute does not receive deference unless the federal agency charged with administering that statute has expressly approved the state’s interpretation.” Since EPA is charged with administering the CWA and was not involved in approving NYDEC’s interpretation, NYDEC did not receive deference. Similarly, however, “given that FERC is not charged in any manner with administering the [CWA],” AES Sparrows Point LNG, LLC v. Wilson, 589 F.3d 721, 730 (4th Cir. 2009); see also Alabama Rivers Alliance v. FERC, 325 F.3d 290, 297 (D.C. Cir. 2003), the Court also found it would not defer to FERC’s interpretation and would review Section 401 de novo.

In response to NYDEC’s argument that the waiver period begins only after NYDEC deems an application “complete,” the Court found that the plain language of the statute establishes a bright-line rule. “[T]he timeline for a state’s action regarding a request for certification ‘shall not exceed one year’ after ‘receipt of such request.’” Without this bright line, the Court suggested states could apply a subjective standard and theoretically request supplemental information indefinitely. Still, the Court recognized that a state has the authority to simply deny the application without prejudice or request that the applicant withdraw and resubmit its application. Because NYDEC failed to act within one-year after receipt of Millennium’s initial request for certification, the Second Circuit held that NYDEC had thus waived its certification authority.

The Court also found that FERC has jurisdiction over the project, even though it is entirely located in one state. Although the NGA provides FERC with authority over the transportation of natural gas in interstate commerce, the Court reasoned that if a pipeline is an integrated part of an interstate system, then FERC has jurisdiction. Since the Millennium pipeline would transport out-of-state gas from the Millennium mainline to the Valley Energy Center it was deemed to be part of an integrated system transporting gas in interstate commerce.

The Second Circuit’s decision makes clear that the initial request for water quality certification triggers the one-year waiver period, whether or not the state agency deems the application complete. While this clear time period for review may lead to more state 401 denials without prejudice where the state agency believes it lacks necessary information or believes it does not have enough time to prepare a reasoned decision, it will also likely encourage state agencies to move more quickly to meet the one-year deadline.

]]>FERC Rules on State Waiver of Section 401 Water Quality Certificationhttps://www.pipelinelaw.com/2018/01/17/ferc-rules-state-waiver-section-401-water-quality-certification/
Thu, 18 Jan 2018 00:05:29 +0000https://www.pipelinelaw.com/?p=1935On January 11, 2018, the Federal Energy Regulatory Commission (FERC) denied Constitution Pipeline Company, LLC’s Petition for a Declaratory Order that New York had waived its ability to act under section 401 of the Clean Water Act (CWA) by failing to grant or deny Constitution’s application for a section 401 certification within a “reasonable period of time.”

Continue Reading]]>On January 11, 2018, the Federal Energy Regulatory Commission (FERC) denied Constitution Pipeline Company, LLC’s Petition for a Declaratory Order that New York had waived its ability to act under section 401 of the Clean Water Act (CWA) by failing to grant or deny Constitution’s application for a section 401 certification within a “reasonable period of time.” See In re Constitution Pipeline Co., LLC, 162 FERC ¶ 61,014 (Jan. 11, 2018). The decision is another in a sequence of decisions from FERC and the federal courts of appeals concerning the time period for States to act under section 401.

CWA section 401 requires, as a prerequisite for federal permits for projects that may result in a discharge into navigable waters, that affected States certify that any such discharge will comply with the CWA. States can waive this requirement, and if they do not act within “a reasonable period of time (which shall not exceed one year) after receipt” of the request for the certification, waiver is automatic.

In June 2017, the D.C. Circuit held that, with respect to natural gas pipeline projects, FERC must determine, in the first instance, whether a State has waived due to inactivity. Millennium Pipeline Co., LLC v. Seggos, 860 F.3d 696, 700-01 (2017). The Courts of Appeals do not have jurisdiction to address the question until FERC decides whether waiver has occurred. Id. Later that year, FERC held that a State’s one-year clock begins to run from the date the State first receives the request. See In re Millennium Pipeline Company, L.L.C., 160 FERC ¶ 61,065 (2017). In so ruling, FERC rejected the approach taken by the U.S. Army Corps of Engineers, which starts the reasonable-time clock from the date the Corps concludes that a “valid” request has been received. See 33 C.F.R. § 325.2(b)(1)(ii). FERC’s decision is currently on appeal to the Second Circuit.

Constitution Pipeline initially applied for a 401 certification from NYSDEC in August 2013. Constitution withdrew and re-submitted the application twice—first in May 2014 and again on April 27, 2015. On April 22, 2016, NYSDEC denied Constitution’s application. Constitution sought review of the denial in the Second Circuit and argued, among other things, that NYSDEC had waived by not acting within a reasonable time. The Second Circuit, like the D.C. Circuit in Millennium Pipeline, concluded that it lacked jurisdiction to consider Constitution’s waiver argument.

Constitution then petitioned FERC for an order that NYSDEC had waived, either because the most recent re-submittal did not re-start the clock, because it was purely ministerial, or because the more than 11 months NYSDEC used to process the resubmitted application was more than a “reasonable period of time.” FERC denied the petition and articulated two noteworthy principles about waiver.

First, FERC interpreted its decisions to hold that one year is the reasonable period of time for States to process 401 applications. It would not impose a lesser period on a case-by-case basis.

Second, FERC held that it would not assess the intent behind a re-submitted application. Although FERC voiced concern about the practice in some States of requiring withdrawal and resubmission as a way to create more time for the State to act, it decided that evaluating re-submissions on a case-by-case basis would be too cumbersome. Instead, FERC opted for a bright-line rule that treats all re-submitted applications for 401 certifications as re-starting the one-year clock.

]]>FERC: Water Quality Certification Waiver Period for Pipeline Projects Begins Upon Receipt of a Written Request for Certificationhttps://www.pipelinelaw.com/2017/09/18/ferc-water-quality-certification-waiver-period-pipeline-projects-begins-upon-receipt-written-request-certification/
Mon, 18 Sep 2017 18:10:25 +0000https://www.pipelinelaw.com/?p=1814On September 15, 2017, the Federal Energy Regulatory Commission (FERC or the Commission) issued an order in which it concluded that delays by the New York Department of Environmental Conservation (NYDEC or the Department) in processing Millennium Pipeline Company’s application for Clean Water Act (CWA) water quality certification constituted a waiver of the certification requirement.

Continue Reading]]>On September 15, 2017, the Federal Energy Regulatory Commission (FERC or the Commission) issued an order in which it concluded that delays by the New York Department of Environmental Conservation (NYDEC or the Department) in processing Millennium Pipeline Company’s application for Clean Water Act (CWA) water quality certification constituted a waiver of the certification requirement. The order resolves a lengthy saga regarding water quality certification for Millennium’s Valley Lateral Project. It reaffirms previous FERC precedent establishing that the one-year waiver period for CWA water quality certification decisions by state agencies begins when the state agency receives a written application for certification, regardless of the state agency’s determination that the application is incomplete or requests for further information.

The central issue in the Millennium Pipeline controversy was when the statutory one-year waiver period (described here) for CWA water quality certification begins. Given the implications of the project’s timeline and dealings with NYDEC on this issue for future pipeline projects, a chronology of the key events leading up to the FERC order is included below. Millennium took the position that the one-year waiver period commenced on November 13, 2015 (when the company first submitted a written request for certification to NYDEC), whereas NYDEC asserted that the period commenced on August 31, 2016 (when Millennium provided the second of its responses to NYDEC’s requests for additional information in support of its application).

In its September 15 order, FERC sided with Millennium, stating that the Commission “interpret[s] the triggering date for the [CWA] waiver provision to be the date a certification application is filed with the relevant agency.” In support of its decision, FERC cited the plain language of the CWA Section 401, which specifies that water quality certification is waived when the certifying agency “fails or refuses to act on a request for certification within a reasonable period of time (which shall not exceed one year) after receipt of such request.” 33 U.S.C. § 1341(a)(1) (emphasis added). FERC further relied upon its own precedent and regulations concerning hydropower projects, as well as case law from the Ninth and D.C. Circuits, in reaching its conclusion.

While the Millennium Order reaffirms FERC’s position with respect to water quality certification waivers in the context of natural-gas pipeline projects, its precedential value is questionable in light of the fact that courts have rejected FERC’s interpretations of the CWA Section 401 certification provisions as authoritative, “given that FERC is not charged in any manner with administering the Clean Water Act.” AES Sparrows Point LNG, LLC v. Wilson, 589 F.3d 721, 730 (4th Cir. 2009); see also Alabama Rivers Alliance v. FERC, 325 F.3d 290, 297 (D.C. Cir. 2003). In its September 15 order, FERC acknowledges this precedent, noting that “[t]he Commission was not a party to [AES Sparrows] nor was the Commission’s interpretation of section 401 at issue.” The next step in the saga will therefore likely be a challenge to the order by NYDEC in the D.C. Circuit, and ultimately a decision that answers at least some of the lingering questions on the timing of the CWA Section 401 waiver provision.

The next step in the saga will therefore likely be a challenge to the Order by NYDEC. The Department would first have to apply for rehearing before FERC (within 30 days of September 15, the date the order was issued), but any application for rehearing would not stay the Commission’s order. Upon receiving an unfavorable decision on rehearing from FERC, the Department could then seek judicial review in the DC Circuit. A judicial decision may be helpful in resolving at least some of the lingering questions on the timing of the CWA Section 401 waiver provision.

Chronology of Events

November 13, 2015: Millennium applied to FERC for a Certificate of Public Convenience and Necessity requesting authorization to construct and operate the Valley Lateral Project.

November 23, 2015: NYDEC received Millennium’s formal written application for water quality certification.

December 7, 2015: NYDEC sent Millennium a Notice of Incomplete Application pending FERC’s issuance of the Environmental Assessment (EA) for the project as required under the National Environmental Policy Act (NEPA).

May 9, 2016: FERC issued an EA for the project.

June 17, 2016: NYDEC sent another Notice of Incomplete Application to Millennium requesting additional information on three protected species and minor clarifications in support of its application.

August 31, 2016: Millennium provided the second of its responses to NYDEC’s requests for additional information in support of its application.

November 9, 2016: FERC granted a Certificate of Public Convenience and Necessity to the project, conditioned upon Millennium filing documentation of receipt of all authorizations required under federal law or evidence of waiver thereof (including CWA Section 401 certification) prior to commencing construction.

June 23, 2017: The D.C. Circuit dismissed Millennium’s petition on jurisdictional grounds, explaining that the company’s remedy was to present evidence of waiver directly to FERC to seek authorization to begin construction of the project.

July 21, 2017: Millennium filed a Request for Notice to Proceed with Construction of the project with FERC, alleging that NYDEC had waived its certification authority by failing to act on Millennium’s application for certification within one year of its submittal on November 23, 2015.

July 26, 2017: NYDEC filed comments with FERC disagreeing that waiver had occurred, stating that the one-year waiver clock began running on August 31, 2016, the date that the Department received Millennium’s final response to the Department’s request for additional information.

August 30, 2017: NYDEC provided Notice denying Millennium’s application for certification and moved FERC to reopen the record and to stay the Commission’s November 9, 2016 Certificate order or, in the alternative, to grant rehearing and stay of the Certificate order.

September 15, 2017: FERC issued an order finding that NYDEC had waived its certification authority by not acting on Millennium’s application by November 23, 2016, one year from the date that the Department received Millennium’s formal written application.